Can Trump Deliver on Economic Promises?
Today is the 139th day that the Republican Congress has not repealed nor replaced Obamacare.
In fact, Congress hasn’t moved forward in any substantive way on any of Pres. Trump’s ambitious economic agenda. There is no sign of tax reform. No sign of significant regulatory reform. No infrastructure spending bill. And of course, we still have Obamacare.
This raises an important question: can Trump deliver on his economic promises?
This isn’t to say the president hasn’t accomplished any of his goals. He’s done what he can to move his agenda forward through executive action. But substantial reforms will require the cooperation of Congress, and that seems pretty iffy at this point. Trump has found imposing his will in Washington D.C. isn’t quite the same as exerting control over the boardroom in Trump tower. The political process is a whole different animal. The president’s difficulties are exacerbated by constant media harping, a divided GOP, political pressures stemming from”Russian ties” allegations, and some would argue his own Twitter account.
The stock market soared after Trump’s election. Most analysts say expectations of economic reform were big drivers of what many have dubbed the “Trump-bump.” Investors expected a repeal of the Affordable Care Act, substantive tax reform, America-first trade policies, infrastructure stimulus, and an easing of regulatory the burden. But whether or not these broad policy changes will ever happen remains pretty iffy. In fact, economic and financial analysts Jim Rickards said implementing Trump’s Economic Plan is “Sheer Fantasy.”
This raises another question for investors: how long will the Trump honeymoon last for the stock market?
In an interview with Bloomberg late last month, Federal Reserve Bank of St. Louis President James Bullard said that at some point the honeymoon period will come to an end, and the GOP will need to deliver on policy expectations that have driven the stock market higher.
The business confidence numbers shot up after the election. The president was perceived as more pro business than the previous administration. Washington does have to deliver at some point and I think that is a concern going forward, whether the honeymoon period would end at some point and maybe the reality of American politics would settle in. We’ll see if that happens or not. I think the jury is out on all that.”
Bullard said anticipation of tax reform was a big driver in the post-election stock market run.
The equity markets are up a lot in the US since the election. My interpretation is that a lot of that is in anticipation of corporate tax changes and possibly personal tax changes that are afoot in the US And all by themselves those tax changes would revalue the US corporate sector on the order of 10 to 15%, which is about what has happened since the election.”
The Trump administration released an ambitious tax reform plan in April, but it was woefully short on details. What has happened since then? Very little, other than some congressional committee hearings and posturing by GOP House and Senate leadership.
So can Trump, Sen. Mitch McConnell, and Rep. Paul Ryan all get on the same page and move substantive legislation forward in Congress? Can Republican leadership rein in renegade members of the party like Sen. Rand Paul and Rep. Thomas Massie to create a united front? Can the administration cut through all of the political smoke and weather the scandals Democrats and the media will undoubtedly keep harping on? All of this remains to be seen. But there is no question the president faces tough headwinds as he tries to implement his agenda.
One thing is certain. The honeymoon won’t last forever. At some point, Americans will demand action. If there aren’t signs of progress soon, the air could start coming out of that Trump-bump stock market.
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Photo by Gage Skidmore used under creative commons license.